WHAT MAKES

PINCON SPIRIT
ONE OF THE
MOST EXCITING
PLAYS OF A
TRANSFORMING
INDIA?
PINCON SPIRIT LIMITED
CORPORATE PRESENTATION
DECEMBER 2016

DISCLAIMER
Certain statements in this document may be forward looking statements. Such
forward-looking statements are subject to certain risks and uncertainties like
government actions, local political or economic developments, technological risks,
and many other factors that could cause our actual results to differ materially from
those contemplated by the relevant forward looking statements. Pincon Spirit
Limited will not be in any way responsible for any action taken based on such
statements and undertakes no obligation to publicly update these forward-looking
statements to reflect subsequent events or circumstances.

FOUR THINGS MAKE PINCON SPIRIT

ONE OF THE MOST EXCITING PLAYS OF
INDIAS ALCO-BEVERAGE INDUSTRY

Minimal
demonetization
impact.

Aggressive
revenue, profit and
investment growth.

Considerably
undervalued
compared to
sectoral peers.

Dynamic lifestyle
proxy of a
transforming sector.

MINIMAL

DEMONETIZATION

IMPACT.

DEMONETISATION IMPACT
ON OUR CUSTOMERS
Reduced value
From abundant currency into scarce legal tender
Enhanced stress
Limited resources to manage household and business
operations
Increased anxiety
Consumer sentiment affected, moderating spending
Common perception
Reduced discretionary spending

INTERESTINGLY, PINCON RELATIVELY

INSULATED FROM DEMONETIZATION IMPACT
Market churn
Organized Pincon
to carve away
business from
unorganised
brands and
distributors

Business space
Alcohol relaxes and
de-stresses; ideal
good market and
bad market product

Demonetizationplus
Rs 100 (continuing
legal tender)
currency largely
used for our
products

INTERESTINGLY, PINCON RELATIVELY

INSULATED FROM DEMONETIZATION IMPACT
Customer niche
Most Pincon
customers enjoy
adequate volumes
of Rs 100 currency
note

Product pricing
Most Pincon products priced less than
Rs 100
All Pincon IMIL brands priced Rs 65 per bottle
(government regulated price)
Most Pincon IMFL products priced under
Rs 100 per case
For high-end Pincon IMFL brands (priced
Rs 150+ per case, the Company increased
supply of smaller-sized bottles

SUSTAINED
AGGRESSIVE
GROWTH

RICH TRACK
RECORD

54.57%

67.63%

Revenue (5-year CAGR)

EBIDTA (5-year CAGR)

2010-11

2015-16

2010-11

2015-16

Rs 106.55 crore

Rs 946.06 crore

Rs 4.24 crore

Rs 56.10 crore

54.64%

44.55%

Net Profit (5-year CAGR)

Net worth (5-year CAGR)

2010-11

2015-16

2010-11

2015-16

Rs 2.81 crore

Rs 24.85 crore

Rs 14.29 crore

Rs 90.52 crore

OVER THE YEARS

Increased profitability

195 bps

(0.01) bps

Growth in EBIDTA margin (5 years)

Growth in net margin (5 years)

2010-11

2015-16

2010-11

2015-16

3.98%

5.93%

2.64%

2.63%

790 bps

1126 bps

Growth in ROE (5 years)

Growth in ROCE (5 years)

2010-11

2015-16

2010-11

2015-16

19.66%

27.56%

29.68%

40.94%

ATTRACTIVE
GROWTH IN FY17
(Rs crore)

H1/2015-16

H1/2016-17

Growth (%)

Revenue

460.34

618.18

34.29

EBIDTA

25.08

41.90

67.07

Net profit

11.50

18.57

61.48

EBIDTA margin (%)

5.45

6.78

133 bps

Net margin (%)

2.50

3.00

50 bps

Earnings per share (Rs)

11.48

4.21

-*

*Equity dilution due to issue of bonus shares

1:1 bonus issued in Oct 2015
1:1 bonus issued in June 2016

INCREASINGLY ATTRACTIVE
BUSINESS LANDSCAPE
Increased personal incomes
Decline in spending on staples as % of income
Increased discretionary spending as % of income
Growing social acceptance of alcohol
consumption
Stronger traction for branded products

ATTRACTIVE BUSINESS MODEL

FOR AGGRESSIVE GROWTH
First phase (2010-15)

Second phase (2016-19)

Focus on growing
IMIL revenues by
providing superior
alternative to country
liquor

Mobilise accruals and growth

capital (net worth)

Timely acquisitions

Reinvest IMIL profits into

IMFL capacity growth
Reinvest IMIL profits into
geographic expansion
IMFL capacity growth to be
driven through timeefficient acquisitions
Sustained acquisitions
focus (shrinking mind-tomarket)

Third phase
(2020 onwards)
Extend from
regional to
national
footprint

GROWTH THROUGH DIVERSE

GROUND-LEVEL INITIATIVES
Through wider and deeper geographic presence
Through increased acquisitions
Through debottlenecking
Through value-added product mix
Through wider product portfolio
Through deeper operational integration

WHAT MAKES
OUR BUSINESS MODEL ATTRACTIVE

No long-term debt
Tight working capital control
Comfortable interest cover
Widening product base
Rising margins

WHAT MAKES
OUR BUSINESS MODEL ATTRACTIVE

11

11

Receivables (days), FY12

Inventory (days), FY12

42

73

Receivables (days), FY16

Inventory (days), FY16

Wider and deeper geographic presence

WHAT MAKES
OUR BUSINESS MODEL ATTRACTIVE
Vision: Rs 2700 crore revenues, FY19

40%

5-10% 60-40

of Bengal alcohol
market

of Karnataka
market

revenue split
between IMILIMFL to become

50-50

Regional IMFL
brands to become
national brands

OUR PREPAREDNESS
FOR AGGRESSIVE GROWTH
Extension from
IMIL to IMFL

Proprietary
supply chain
(100 trucks;
imminent scaleup)

Increased
bottling capacity
through existing
infrastructure

Declining spoketo-market
distance (400km
to 150 km)

Captive PET
bottle capacity (5
lac bottles/
month) by March
2017

Distribution
infrastructure
(own and
outsourced) in
place

Entry into underpenetrated area

through IMIL

Extension into
high-end edible
oils (surrogate
advertising
value)

OUR PREPAREDNESS
FOR AGGRESSIVE GROWTH
Revenue by business segment
2012-13
100%

Edible Oil

2015-16
57%

IMIL

IMFL

2018-19

30%

17%
43%

13%

40%

IMIL.
ADDRESSING
MASS
VOLUMES

THE IMIL BUSINESS

Launched Pincon Bangla No.1; entered IMIL space (2014)
Fused grain-based ENA and demineralised water
Commissioned manufacturing facilities (state-of-the-art
bottling facilities producing 1.3 crore bottles per month)
Pincon Bangla No. 1 available in 2,000+ retail outlets
across 21 districts
IMIL revenues doubled between 2014-15 and 2015-16
IMIL topline 13% of corporate revenues, 2015-16

FAVOURABLE REGULATORY IMIL DIRECTION

Bengal pro-alcohol consumption; industry making a
significant contribution to state exchequer
Bengal government a single party majority; stable political
outlook
Large addressable opportunity; unorganized segment
addressing a large part of states IMIL consumption
Proposed GST expected to enhance organized industry
competitiveness

PINCONS IMIL BUSINESS.

GROWTH-READY.
Investing in infrastructure

IMIL manufacturing facilities panBengal, March 31, 2016

IMIL manufacturing facilities panBengal, March 31, 2019

1.3

IMIL production capacity as on

March 31, 2016 (crore bottles per
month)

IMIL production capacity as on

March 31, 2019 (crore bottles per
month)

PINCON.
PREPARING FOR GROWTH

1 Investing in infrastructure
Capacity addition
Invested Rs 24 crore in asset acquisition
Acquired two Bengal manufacturing units (Dankuni and Barahanagar) and two
highest selling IMIL brands - Bengal Tiger (< 20 years old and Udaan (<15 years
old) in 2016
Acquired IMIL bottling unit of National Industrial Corporation Ltd. in Asansol in
2016
Proposed acquisition of additional North Bengal manufacturing facilities
Invested Rs 10 crore in three years (2013 to 2016) in automation and upgradation;

PREPARING FOR GROWTH

2 Growing sales
Growing
presence from
40 Bengal
districts to all
65

Introducing
four flavoured
Bangla No. 1
variants

Make newly
acquired
brands
available
across Bengal

Assist
government in
countering
unlicensed
country liquor
offtake

PREPARING FOR GROWTH

3 Strengthening capacity
Manufacturing
facilities proximate
to large consuming
centres; lower
logistics cost

Invested in captive
truck fleet; timely
and cost-effective
product delivery;
fleet expansion
planned

Increased shelf
space in each
district to capture
growing demand

IMFL.
GROWING
PINCON
SEGMENT

IMFL BUSINESS

Evolved IMFL presence from trading to

manufacturing to marketing
Only Indian player covering production,
wholesale and retail.
IMFL topline Rs 542.31 crore in 2015-16; IMFL
revenues growing 38.50% (5-year CAGR);
IMFL contribution to topline 56.17% in 2015-16

IMFL TRADING

Entered trading in 2005-06

Markets leading alcohol brands; tie-ups
with 9,800+ licenses across India

IMFL PROPRIETARY
BUSINESS
Produces proprietary alcohol brands;
capacity 100,000 cases per month;
present at 4 facilities across four
states (West Bengal, Karnataka,
Odisha and Jharkhand)
One of the few manufacturers using
taste-friendly grain-based ENA route
Portfolio comprises 11 brands across
five categories (rum, whisky, vodka,
brandy and gin)

PROMISING IMFL SPACE

Large market
growing at
10-12%
annually

Most Indian
players regional
in character

Alcohol MNCs
in India
consolidating
and focusing on
flagship brands
an opportunity

IMFL GROWTH AGENDA

Expand the Pincon portfolio

Widen and deepen distribution network
Increase core brands (Highland Blue
Whisky, Pincon No.1 Select Whisky and
Ultra Force XXX Jamaican Rum) in
Karnataka
Enhance presence beyond two states

EDIBLE OIL.
PINCONS
FLANKING
STRATEGY

THE EDIBLE OIL BUSINESS

Edible oil
segment
established in
2013 (Pincon
and Kings Coin
brands

Marketing
footprint in
Bengal and
North East India

Diverse
products, robust
marketing
strategy, strong
distribution and
visible brand

SEGMENT PROSPECTS
India is the worlds
largest edible oil
importer; imports
increased nearly
2.5x in 8 years

Growing disposable
incomes and
urbanization
catalysed per
capita oil
consumption - from
7 kgs in midEighties to 16 kgs
today

Growing incomes to
lead to enhanced
edible oil
consumption

DRIVING EDIBLE OIL VOLUMES

New product vertical: Pincon intends to graduate to the
100% pure mustard oil niche, the apex of the product value
chain
Brand recall: Significant branding and promotion investment
to consolidate position in the markets
Under consideration: Planned investment in a state-of-the-art
edible oil refinery (lakh litre) for Rs 300 crore to produce
100% pure mustard oil

PINCON. PROFITABILITY UPTICK

250 bps

100 bps

Increase in EBIDTA
margin (FY16-FY19)

Limited increase in net

margin (FY16-FY19)

PINCON. PROFITABILITY DRIVERS

1 Business integration
Pincon investing in a
distillery to
manufacture ENA, its
critical input; the
Company has
secured sale of all byproducts (CO2 and
agri waste); also
investing in
renewable energy

Pincon investing in a
PET bottle plant
(capacity 5 lac bottles
per month) which will
optimize packaging
costs

Pincon investing in
logistics infrastructure
to optimize
distribution costs

PINCON. PROFITABILITY DRIVERS

2 Other factors
Enhance sale volume of
IMFL branded products;
evolving revenues
between trading and
proprietary businesses
from 47/53 (2015-16) to
55/45 (2019-20)

Introduce novel sales

schemes for proprietary
retail offtake (33 outlets);
to widen the retail chain
into strategic markets

PINCON.
CONSIDERABLY
UNDERVALUED
COMPARED
TO SECTORAL
PEERS

OVER
THE YEARS
FAST GROWING
WEALTH CREATOR

22x

29x

13x

Revenue growth in the

last seven years

EBIDTA growth
in seven years

Net profit growth in

seven years

Rs. 43 crore in FY09

Rs. 1.94 crore in FY09

Rs. 1.93 crore in FY09

Rs. 988 crore in FY16

Rs. 56.10 crore in FY16

Rs. 24.86 crore in FY16

9x

32x

4x

Shareholders funds
growth in seven years

Increase in
shareholder family

Growth in market
capitalization

Rs. 10.09 crore in FY09

245 in FY14

Rs. 68 crore ias on Nov 14, 2014*

Rs. 90.21 crore in FY16

7853 in FY16

Rs. 244 crore ias on March 31, 2016

*Listed on BSE

Despite Pincon being one of the fastest growing alcohol

companies in india, it is also one of the most under-valued.

FINANCIAL PERFORMANCE:
SUPERIOR TO PEERS
(FY16)

Som Distillers

Globus

Pincon Spirits

EBIDTA margin (%)

15.40

10.38

5.93

Net margin (%)

6.04

1.76

2.63

Earnings per share (Rs)

4.90

4.40

11.80

Debt-equity ratio (x)

0.73

0.63

2.80

Interest cover (x)

3.67

4.38

3.36

Finance exp as %age of revenue

4.20

2.37

1.76

Operating assets turnover ratio

0.77

0.95

2.40

Fixed assets turnover

3.15

1.12

16.60

Current ratio

2.09

0.65

1.39

Return on investment (%)

13.06

5.83

16.23

PINCON. OUT-PERFORMING
THE BROADER INDEX

VALUE ENHANCED. YET EXTENSIVELY

UNDERVALUED.
Rich 18-year sectoral experience of the management overlooked
Emerging brand consolidation by alcobev giants resulting in sectoral opportunity
Regional domination story relatively under-appreciated
Large operating leverage in South Indian market
Entrepreneurial capability overlooked
Low leverage not reflected in the valuation
Value of business integration (value chain) largely overlooked
Superior hub and spoke distribution approach
Business valued considerably lower than peers
Building blocks story not adequately priced in
No dilution foreseen beyond Rs 5.1 crore equity shares of Rs 10 face value

VALUE ENHANCED. YET EXTENSIVELY

UNDERVALUED.
Som Distillers

Globus

Pincon Spirits

Market capitalization, Rs crore

(31 March 2016)

499

188

244

P/E (FY16 earnings)

37.3

18.7

P/BV (FY16 book value)

3.9

0.5

1.3

DYNAMIC
LIFESTYLE
PROXY OF A
TRANSFORMING
SECTOR.

DEMOGRAPHIC DIVIDEND
One in every six people on Earth is Indian. And with over 1.3 billion
people, its population will soon overtake China.
According to a United Nations report from 2014, with 356 million
between 10 and 24 years old, India (IFN) has the worlds largest youth
population.
According to Ernst and Young, the Indian workforce will grow to 900
million strong by 2020.
The median age in India in 2015 was 27.3 years, much less than most
of the developed world, which is saddled with a graying workforce.
More than 480 million Indians are above the drinking age; around 150
million will be added to this group across five years.

INCREASING EARNINGS AND

DISCRETIONARY EXPENSES
Increasing earnings

Growing expenditure

Sustained economic growth over 7% is

expected to disposable income in the hands
of the average India per capita income to
cross the Rs 100,000 mark in 2016-17

The White Paper published by Hansa

Cequity states that the share of
discretionary spending is expected to
contribute 56% of Indian household
expenditure by FY21

Implementation of the Seventh Pay

Commission is expected to increase
disposable income of government
employees pan-India
With the per capita income cross the US
$1,000 mark the expenditure basket of the
average India has shifted majority share
shifting from staples to discretionary

As per a study by Assocham, in 2015 luxury

jewelry, electronics, sports utility cars and
fine dining have grown immensely. Apparel,
accessories, wines and spirits are growing
as strongly as in the past.

THANK
YOU
For more information, please visit

www.pinconspirit.in
Investor relations contact

Arun Kumar Ganeriwala

Senior Vice President Corporate Finance

Mobile: 98301 35671 Email: arun.ganeriwala@pinconspirit.in